US Dollar Monthly Exchange Rates Forecast - April 2025

The US dollar has experienced notable volatility following President Donald Trump's recent implementation of broad tariffs, including a 10% baseline rate on most imports and higher duties targeting key trade partners like China and the European Union. Contrary to expectations that such protectionist measures might bolster the currency, the dollar has depreciated, with the US Dollar Index (DXY) dropping approximately 6% since the beginning of 2025, reaching its lowest point since last autumn. This decline reflects growing investor concerns about potential recessionary pressures and diminishing confidence in US economic policies. Notably, the euro has surged above the 1.10 mark against the dollar, indicating a shift as investors seek safer assets amid escalating trade tensions. Analysts warn of a potential crisis of confidence in the dollar, with some highlighting that the scale of the tariffs has unsettled markets, leading to fears of disorderly currency movements. Additionally, the Federal Reserve faces challenges in balancing inflationary pressures from tariffs with the risk of slowing economic growth, complicating future monetary policy decisions. Looking ahead, the dollar's trajectory will largely depend on the evolution of trade policies and their impact on the US economy. While some forecasts suggest a potential stabilization or modest strengthening of the dollar in the latter half of 2025, the immediate outlook remains uncertain, contingent on policy decisions and global economic responses to the current trade environment.

Canada was largely exempted from these new measures, maintaining preferential terms under the United States–Mexico–Canada Agreement (USMCA). However, existing US tariffs of 25% on Canadian steel, aluminum, and automobiles remain in place, prompting Prime Minister Mark Carney to announce retaliatory tariffs on US vehicles. These trade tensions have introduced uncertainty into the market, impacting the CAD's performance. On the monetary policy front, the Bank of Canada reduced its benchmark interest rate to 2.75%, citing concerns over economic growth and escalating trade disputes. Analysts anticipate potential further rate cuts in response to recent labor market data indicating job losses. The CAD's future trajectory will depend on the evolution of trade relations, domestic economic performance, and subsequent policy decisions by the Bank of Canada.

The euro has shown notable resilience, recently breaching the 1.10 mark as investors rotated out of US equities amid rising global uncertainty. Confidence in European markets has grown, supported by Germany’s surprising shift toward large-scale infrastructure and military spending. However, the outlook now faces headwinds after the US imposed a 20% tariff on EU imports, casting a shadow over the euro’s rally. While speculative positions have turned sharply bullish, further gains may hinge on whether the White House de-escalates to a more manageable 10% baseline. If so, and as US global influence recedes, the euro could remain on solid ground.

The British pound (GBP) has held up well despite new US tariffs of 10% on UK imports. After briefly touching a four-month high, the currency dipped slightly but remains relatively strong. Prime Minister Keir Starmer has framed the trade tension as an opportunity to attract investment, while also exploring import quotas to shield key domestic sectors. However, the impact is already being felt in areas like auto manufacturing, with Jaguar Land Rover pausing US shipments. The pound’s near-term outlook will depend on how the UK navigates these trade challenges and builds new international partnerships.

The Japanese yen (JPY) has recently strengthened, reaching 146.91 against the US dollar, as investors flocked to safe-haven assets amid rising global trade tensions. This move followed the US imposing a 24% tariff on Japanese goods, a major blow to Japan’s export-driven economy. While the Bank of Japan raised rates earlier this year for the first time in over a decade, the renewed trade friction could pressure growth and complicate future policy decisions. Japanese bank stocks have already taken a hit, reflecting broader market concerns about the economic fallout. The yen’s trajectory now hinges on how Japan responds to US pressure and whether trade tensions escalate further.

The Chinese yuan (CNY) has faced significant pressure following the recent escalation in US-China trade tensions. President Donald Trump announced a substantial increase in tariffs, raising duties on Chinese imports from 20% to 54%. In retaliation, China imposed a 34% tariff on US goods. These developments have intensified concerns over China's export-driven economy, with economists warning of a potential 1–2 percentage point reduction in GDP growth. The Chinese government has expressed strong opposition to the US tariffs and has vowed to implement countermeasures if they are not lifted. As the situation evolves, the yuan's performance will likely be influenced by ongoing trade negotiations and the broader economic impact of these tariffs.

The Indian rupee (INR) has held relatively steady despite the US imposing a 26% tariff on Indian imports. While the move is expected to shave up to 0.8 percentage points off India’s GDP growth, the government is actively negotiating a trade agreement with Washington to ease the impact. Analysts forecast that the Reserve Bank of India may respond with further rate cuts to support the economy. Looking ahead, the rupee’s trajectory will depend on the success of these trade talks, the RBI’s policy path, and broader global economic trends.

The Australian dollar (AUD) has come under renewed pressure following the US decision to impose a 10% tariff on Australian imports. The move has pushed the AUD to a five-year low, reflecting investor concerns about the potential drag on Australia's export-driven economy. Sectors such as agriculture and mining are particularly vulnerable, raising the likelihood of a policy response from the Reserve Bank of Australia if growth slows further. In response, Prime Minister Anthony Albanese has signaled plans to leverage Australia’s critical mineral resources in upcoming negotiations, positioning them as a strategic bargaining chip. The future of the AUD will depend on the outcome of these trade talks and broader shifts in global risk sentiment.

The New Zealand dollar (NZD) has come under pressure after the US imposed a 10% tariff on New Zealand imports, fueling concerns over a deepening global trade conflict. The currency has weakened, recently trading around $0.5597 USD, as markets react to the potential impact on New Zealand’s export-heavy economy—particularly in sectors like agriculture and manufacturing. While the government has voiced concern, Trade Minister Damien O’Connor confirmed New Zealand will not retaliate, emphasizing the importance of maintaining open trade channels. The Reserve Bank of New Zealand may consider further policy support if trade pressures intensify. The NZD’s outlook will hinge on how global trade dynamics evolve and whether diplomatic efforts can stabilize the economic environment.

The Mexican peso (MXN) has held steady despite growing global trade tensions, supported by Mexico’s exclusion from the harshest of the new US tariffs. While many nations were hit with a 10% baseline duty, Mexico maintained its preferential access under the USMCA, although certain exports—like non-compliant vehicles, auto parts, and steel—still face existing 25% tariffs. President Claudia Sheinbaum has emphasized a pragmatic, non-retaliatory approach to protect trade stability with the US. On the domestic front, the Bank of Mexico has moved to support growth with consecutive rate cuts as economic headwinds mount. Looking ahead, the peso’s trajectory will depend on Mexico’s ability to balance external pressures with internal reforms and macroeconomic stability.